Howmet Aerospace Reports Third Quarter 2024 Results

Q4 2024 Guidance

FY 2024 Guidance

Low

Baseline

High

Low

Baseline

High

Revenue

$1.850B

$1.870B

$1.890B

$7.390B

$7.410B

$7.430B

Adj. EBITDA^*1

$478M

$488M

$498M

$1.885B

$1.895B

$1.905B

Adj. EBITDA Margin^*1

25.8%

26.1%

26.3%

25.5%

25.6%

25.6%

Adj. Earnings per Share^*1

$0.70

$0.71

$0.72

$2.65

$2.66

$2.67

Free Cash Flow¹

$890M

$920M

$940M

____________________________________

_{* Excluding special items}

____________________________________

_{* Excluding special items}

Engine Products

(in U.S. dollar millions)

Q3 2023

Q4 2023

Q1 2024

Q2 2024

Q3 2024

Third-party sales

$ 798

$ 852

$ 885

$ 933

$ 945

Inter-segment sales

$ 5

$ 1

$ 2

$ 1

$ 3

Provision for depreciation and amortization

$ 33

$ 33

$ 33

$ 33

$ 34

Segment Adjusted EBITDA

$ 219

$ 233

$ 249

$ 292

$ 307

Segment Adjusted EBITDA Margin

27.4 %

27.3 %

28.1 %

31.3 %

32.5%

Restructuring and other credits

$ -

$ (1)

$ -

$ (1)

$ 1

Capital expenditures

$ 30

$ 28

$ 55

$ 33

$ 55

Fastening Systems

(in U.S. dollar millions)

Q3 2023

Q4 2023

Q1 2024

Q2 2024

Q3 2024

Third-party sales

$ 348

$ 360

$ 389

$394

$392

Provision for depreciation and amortization

$ 12

$ 11

$ 11

$13

$12

Segment Adjusted EBITDA

$ 76

$ 80

$ 92

$101

$102

Segment Adjusted EBITDA Margin

21.8 %

22.2 %

23.7 %

25.6%

26.0%

Restructuring and other charges

$ 1

$ -

$ -

$2

$1

Capital expenditures

$ 9

$ 8

$ 7

$5

$5

Engineered Structures

(in U.S. dollar millions)

Q3 2023

Q4 2023

Q1 2024

Q2 2024

Q3 2024

Third-party sales

$ 227

$ 244

$ 262

$275

$253

Inter-segment sales

$ -

$ 2

$ 1

$ 3

$ 3

Provision for depreciation and amortization

$ 12

$ 11

$ 11

$ 11

$ 10

Segment Adjusted EBITDA

$ 30

$ 33

$ 37

$ 40

$ 38

Segment Adjusted EBITDA Margin

13.2 %

13.5 %

14.1 %

14.5%

15.0%

Restructuring and other charges

$ 1

$ 14

$ -

$ 14

$ 1

Capital expenditures

$ 6

$ 5

$ 6

$ 5

$ 5

Forged Wheels

(in U.S. dollar millions)

Q3 2023

Q4 2023

Q1 2024

Q2 2024

Q3 2024

Third-party sales

$ 285

$ 275

$288

$ 278

$245

Provision for depreciation and amortization

$ 10

$ 10

$ 10

$ 10

$10

Segment Adjusted EBITDA

$ 77

$ 72

$ 82

$ 75

$64

Segment Adjusted EBITDA Margin

27.0 %

26.2 %

28.5%

27.0 %

26.1%

Restructuring and other charges

$ -

$ -

$ -

$ -

$ 1

Capital expenditures

$ 9

$ 11

$ 12

$ 9

$ 14

Q4 2024 Guidance

FY 2024 Guidance

Low

Baseline

High

Low

Baseline

High

Revenue

$1.850B

$1.870B

$1.890B

$7.390B

$7.410B

$7.430B

Adj. EBITDA^*1

$478M

$488M

$498M

$1.885B

$1.895B

$1.905B

Adj. EBITDA Margin^*1

25.8%

26.1%

26.3%

25.5%

25.6%

25.6%

Adj. Earnings per Share^*1

$0.70

$0.71

$0.72

$2.65

$2.66

$2.67

Free Cash Flow¹

$890M

$920M

$940M

* Excluding Special Items

¹ Reconciliations of the forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as the directly comparable GAAP measures, are not available without unreasonable efforts due to the variability and complexity of the charges and other components excluded from the non-GAAP measures, such as the effects of foreign currency movements, gains or losses on sales of assets, taxes, and any future restructuring or impairment charges. In addition, there is inherent variability already included in the GAAP measures, including, but not limited to, price/mix and volume. Howmet Aerospace believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Operations (unaudited)

(in U.S. dollar millions, except per-share and share amounts)

Quarter ended

September 30, 2024

June 30, 2024

September 30, 2023

Sales

$

1,835

$

1,880

$

1,658

Cost of goods sold (exclusive of expenses below)

1,253

1,287

1,183

Selling, general administrative, and other expenses

85

97

87

Research and development expenses

9

7

9

Provision for depreciation and amortization

68

69

68

Restructuring and other (credits) charges

(1

)

22

4

Operating income

421

398

307

Loss on debt redemption

6

-

-

Interest expense, net

44

49

54

Other expense, net

17

15

11

Income before income taxes

354

334

242

Provision for income taxes

22

68

54

Net income

$

332

$

266

$

188

Amounts Attributable to Howmet Aerospace Common Shareholders:

Earnings per share - basic⁽¹⁾:

Net income per share

$

0.81

$

0.65

$

0.45

Average number of shares⁽²⁾⁽³⁾

408

408

412

Earnings per share - diluted⁽¹⁾:

Net income per share

$

0.81

$

0.65

$

0.45

Average number of shares⁽²⁾⁽³⁾

410

411

415

Common stock outstanding at the end of the period

407

408

412

In order to calculate both basic and diluted earnings per share, preferred stock dividends declared of less than $1 for the quarters presented need to be subtracted from Net income.

For the quarters presented, the difference between the diluted average number of shares and the basic average number of shares relates to share equivalents associated with outstanding restricted stock unit awards and employee stock options.

As average shares outstanding are used in the calculation of both basic and diluted earnings per share, the full impact of share repurchases is not fully realized in earnings per share ("EPS") in the period of repurchase since share repurchases may occur at varying points during a period.

Howmet Aerospace Inc. and subsidiaries

Consolidated Balance Sheet (unaudited)

(in U.S. dollar millions)

September 30, 2024

December 31, 2023

Assets

Current assets:

Cash and cash equivalents

$

475

$

610

Receivables from customers, less allowances of $- in both 2024 and 2023

757

675

Other receivables

18

17

Inventories

1,902

1,765

Prepaid expenses and other current assets

239

249

Total current assets

3,391

3,316

Properties, plants, and equipment, net

2,358

2,328

Goodwill

4,047

4,035

Deferred income taxes

39

46

Intangibles, net

484

505

Other noncurrent assets

239

198

Total assets

$

10,558

$

10,428

Liabilities

Current liabilities:

Accounts payable, trade

$

917

$

982

Accrued compensation and retirement costs

288

263

Taxes, including income taxes

59

68

Accrued interest payable

25

65

Other current liabilities

227

200

Short-term debt

1

206

Total current liabilities

1,517

1,784

Long-term debt, less amount due within one year

3,393

3,500

Accrued pension benefits

629

664

Accrued other postretirement benefits

84

92

Other noncurrent liabilities and deferred credits

432

351

Total liabilities

6,055

6,391

Equity

Howmet Aerospace shareholders' equity:

Preferred stock

55

55

Common stock

407

410

Additional capital

3,386

3,682

Retained earnings

2,453

1,720

Accumulated other comprehensive loss

(1,798

)

(1,830

)

Total equity

4,503

4,037

Total liabilities and equity

$

10,558

$

10,428

Howmet Aerospace and subsidiaries

Statement of Consolidated Cash Flows (unaudited)

(in U.S. dollar millions)

Nine months ended September 30,

2024

2023

Operating activities

Net income

$

841

$

529

Adjustments to reconcile net income to cash provided from operations:

Depreciation and amortization

204

204

Deferred income taxes

39

92

Restructuring and other charges

21

8

Net realized and unrealized losses

18

17

Net periodic pension cost

31

28

Stock-based compensation

54

39

Loss on debt redemption

6

1

Other

4

2

Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:

Increase in receivables

(97

)

(211

)

Increase in inventories

(139

)

(148

)

Decrease (increase) in prepaid expenses and other current assets

9

(12

)

Decrease in accounts payable, trade

(67

)

(57

)

Decrease in accrued expenses

(42

)

(18

)

(Decrease) increase in taxes, including income taxes

(5

)

17

Pension contributions

(33

)

(19

)

Increase in noncurrent assets

(6

)

(2

)

Decrease in noncurrent liabilities

(20

)

(27

)

Cash provided from operations

818

443

Financing Activities

Additions to debt

500

-

Repurchases and payments on debt

(805

)

(376

)

Debt issuance costs

(5

)

-

Premiums paid on early redemption of debt

(5

)

(1

)

Repurchases of common stock

(310

)

(150

)

Proceeds from exercise of employee stock options

7

10

Dividends paid to shareholders

(76

)

(52

)

Taxes paid for net share settlement of equity awards

(48

)

(77

)

Cash used for financing activities

(742

)

(646

)

Investing Activities

Capital expenditures

(219

)

(164

)

Proceeds from the sale of assets and businesses

9

1

Other

1

-

Cash used for investing activities

(209

)

(163

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(2

)

(1

)

Net change in cash, cash equivalents and restricted cash

(135

)

(367

)

Cash, cash equivalents and restricted cash at beginning of period

610

792

Cash, cash equivalents and restricted cash at end of period

$

475

$

425

Howmet Aerospace Inc. and subsidiaries

Segment Information (unaudited)

(in U.S. dollar millions)

1Q23

2Q23

3Q23

4Q23

2023

1Q24

2Q24

3Q24

Engine Products

Third-party sales

$

795

$

821

$

798

$

852

$

3,266

$

885

$

933

$

945

Inter-segment sales

$

2

$

5

$

5

$

1

$

13

$

2

$

1

$

3

Provision for depreciation and amortization

$

32

$

32

$

33

$

33

$

130

$

33

$

33

$

34

Segment Adjusted EBITDA

$

212

$

223

$

219

$

233

$

887

$

249

$

292

$

307

Segment Adjusted EBITDA Margin

26.7

%

27.2

%

27.4

%

27.3

%

27.2

%

28.1

%

31.3

%

32.5

%

Restructuring and other (credits) charges

$

-

$

(1

)

$

-

$

(1

)

$

(2

)

$

-

$

(1

)

$

1

Capital expenditures

$

33

$

21

$

30

$

28

$

112

$

55

$

33

$

55

Fastening Systems

Third-party sales

$

312

$

329

$

348

$

360

$

1,349

$

389

$

394

$

392

Provision for depreciation and amortization

$

11

$

12

$

12

$

11

$

46

$

11

$

13

$

12

Segment Adjusted EBITDA

$

58

$

64

$

76

$

80

$

278

$

92

$

101

$

102

Segment Adjusted EBITDA Margin

18.6

%

19.5

%

21.8

%

22.2

%

20.6

%

23.7

%

25.6

%

26.0

%

Restructuring and other charges

$

-

$

-

$

1

$

-

$

1

$

-

$

2

$

1

Capital expenditures

$

9

$

5

$

9

$

8

$

31

$

7

$

5

$

5

Engineered Structures

Third-party sales

$

207

$

200

$

227

$

244

$

878

$

262

$

275

$

253

Inter-segment sales

$

-

$

1

$

-

$

2

$

3

$

1

$

3

$

3

Provision for depreciation and amortization

$

12

$

12

$

12

$

11

$

47

$

11

$

11

$

10

Segment Adjusted EBITDA

$

30

$

20

$

30

$

33

$

113

$

37

$

40

$

38

Segment Adjusted EBITDA Margin

14.5

%

10.0

%

13.2

%

13.5

%

12.9

%

14.1

%

14.5

%

15.0

%

Restructuring and other charges

$

1

$

5

$

1

$

14

$

21

$

-

$

14

$

1

Capital expenditures

$

10

$

5

$

6

$

5

$

26

$

6

$

5

$

5

Forged Wheels

Third-party sales

$

289

$

298

$

285

$

275

$

1,147

$

288

$

278

$

245

Provision for depreciation and amortization

$

9

$

10

$

10

$

10

$

39

$

10

$

10

$

10

Segment Adjusted EBITDA

$

79

$

81

$

77

$

72

$

309

$

82

$

75

$

64

Segment Adjusted EBITDA Margin

27.3

%

27.2

%

27.0

%

26.2

%

26.9

%

28.5

%

27.0

%

26.1

%

Restructuring and other charges

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

1

Capital expenditures

$

9

$

7

$

9

$

11

$

36

$

12

$

9

$

14

Differences between the total segment and consolidated totals are in Corporate.

Howmet Aerospace Inc. and subsidiaries

Calculation of Financial Measures (unaudited)

(in U.S. dollar millions)

Reconciliation of Total Segment Adjusted EBITDA to Consolidated Income Before Income Taxes

1Q23

2Q23

3Q23

4Q23

2023

1Q24

2Q24

3Q24

Income before income taxes

$

220

$

243

$

242

$

270

$

975

$

303

$

334

$

354

Loss on debt redemption

1

-

-

1

2

-

-

6

Interest expense, net

57

55

54

52

218

49

49

44

Other expense, net

7

(13

)

11

3

8

17

15

17

Operating income

$

285

$

285

$

307

$

326

$

1,203

$

369

$

398

$

421

Segment provision for depreciation and amortization

64

66

67

65

262

65

67

66

Unallocated amounts:

Restructuring and other charges (credits)

1

3

4

15

23

-

22

(1

)

Corporate expense⁽¹⁾

29

34

24

12

99

26

21

25

Total Segment Adjusted EBITDA

$

379

$

388

$

402

$

418

$

1,587

$

460

$

508

$

511

Total Segment Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Total Segment Adjusted EBITDA provides additional information with respect to the Company's operating performance and the Company's ability to meet its financial obligations. The Total Segment Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies. Howmet's definition of Total Segment Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation and amortization. Special items, including Restructuring and other charges (credits), are excluded from net margin and Segment Adjusted EBITDA. Differences between the total segment and consolidated totals are in Corporate.

⁽¹⁾ Pre-tax special items included in Corporate expense

1Q23

2Q23

3Q23

4Q23

2023

1Q24

2Q24

3Q24

Plant fire costs (reimbursements), net

$

4

$

(4

)

$

1

$

(13

)

$

(12

)

$

-

$

(6

)

$

-

Collective bargaining agreement negotiation

-

7

1

-

8

-

-

-

Costs (benefits) associated with closures, supply chain disruptions, and other items

1

9

1

2

13

1

-

(1

)

Total Pre-tax special items included in Corporate expense

$

5

$

12

$

3

$

(11

)

$

9

$

1

$

(6

)

$

(1

)

Howmet Aerospace Inc. and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in U.S. dollars millions)

Reconciliation of Free cash flow

Quarter ended

Nine months ended

1Q24

2Q24

3Q24

3Q24

Cash provided from operations

$

177

$

397

$

244

$

818

Capital expenditures

(82

)

(55

)

(82

)

(219

)

Free cash flow

$

95

$

342

$

162

$

599

The Accounts Receivable Securitization program remains unchanged at $250 outstanding.

Free cash flow is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures (due to the fact that these expenditures are considered necessary to maintain and expand the Company's asset base and are expected to generate future cash flows from operations). It is important to note that Free cash flow does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure.

Howmet Aerospace Inc. and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in U.S. dollar millions, except per-share and share amounts)

Reconciliation of Net income excluding Special items

Quarter ended

3Q23

2Q24

3Q24

Net income

$

188

$

266

$

332

Diluted earnings per share ("EPS")

$

0.45

$

0.65

$

0.81

Special items:

Restructuring and other charges (credits)⁽¹⁾

4

22

(1

)

Loss on debt redemption and related costs

-

-

6

Plant fire costs (reimbursements), net

1

(6

)

-

Collective bargaining agreement negotiations

1

-

-

Costs (benefits) associated with closures, supply chain disruptions, and other items

1

-

(1

)

Subtotal: Pre-tax special items

7

16

4

Tax impact of Pre-tax special items⁽²⁾

(1

)

-

(1

)

Subtotal

6

16

3

Discrete and other tax special items⁽³⁾

(2

)

(6

)

(45

)

Total: After-tax special items

4

10

(42

)

Net income excluding Special items

$

192

$

276

$

290

Diluted EPS excluding Special items

$

0.46

$

0.67

$

0.71

Average number of shares - diluted EPS excluding Special items

415

411

410

Net income excluding Special items and Diluted EPS excluding Special items are non-GAAP financial measures. Management believes that these measures are meaningful to investors because management reviews the operating results of the Company excluding the impacts of Restructuring and other charges (credits), Discrete tax items, and Other special items (collectively, "Special items"). There can be no assurances that additional Special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both Net income and Diluted EPS determined under GAAP as well as Net income excluding Special items and Diluted EPS excluding Special items.

Q2 2024 includes non-cash Special items of a loss on sale of a small manufacturing facility in Engineered Structures $14 and other exit costs, including accelerated depreciation $1.

The Tax impact of Pre-tax special items is based on the applicable statutory rates whereby the difference between such rates and the Company's consolidated estimated annual effective tax rate is itself a Special item.

Discrete tax items for each period included the following:

• for the quarter ended September 30, 2023, a net benefit for other small items ($1);
• for the quarter ended June 30, 2024, an excess tax benefit for stock compensation ($5);
• for the quarter ended September 30, 2024, a net benefit related to additional U.S. federal and state research and development ("R&D") credits claimed for prior years upon completion of the Company's R&D study ($44), and an excess tax benefit for stock compensation ($2).

Howmet Aerospace Inc. and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in U.S. dollar millions)

Reconciliation of Operational tax rate

3Q24

Nine months ended September 30, 2024

Effective tax

rate, as

reported

Special

items⁽¹⁾⁽²⁾

Operational

tax rate, as

adjusted

Effective tax

rate, as

reported

Special

items⁽¹⁾⁽²⁾

Operational

tax rate, as

adjusted

Income before income taxes

$

354

$

4

$

358

$

991

$

21

$

1,012

Provision for income taxes

$

22

$

46

$

68

$

150

$

58

$

208

Tax rate

6.2

%

19.0

%

15.1

%

20.6

%

Operational tax rate is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of the Company excluding the impacts of Special items. There can be no assurances that additional Special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both the Effective tax rate determined under GAAP as well as the Operational tax rate.

⁽¹⁾

Pre-tax special items for the quarter ended September 30, 2024 included Loss on debt redemption and related costs $6 offset by Restructuring and other charges (credits) ($1) and Costs (benefits) associated with closures, supply chain disruptions, and other items ($1). Pre-tax special items for the nine months ended September 30, 2024 included Restructuring and other charges (credits) $21 and Loss on debt redemption and related costs $6 offset by Plant fire costs (reimbursements) ($6).

Tax Special items includes discrete tax items, the tax impact on Special items based on the applicable statutory rates, the difference between such rates and the Company's consolidated estimated annual effective tax rate and other tax related items. Discrete tax items for each period included the following:

• for the quarter ended September 30, 2024, a net benefit related to additional U.S. federal and state R&D credits claimed for prior years upon completion of the Company's R&D study ($44), and an excess tax benefit for stock compensation ($2); and
• for the nine months ended September 30, 2024, a net benefit related to additional U.S. federal and state R&D credits claimed for prior years upon completion of the Company's R&D study ($44), an excess tax benefit for stock compensation ($9), a benefit to release a valuation allowance related to U.S. foreign tax credits ($6), and a net charge for other small items $1.

Howmet Aerospace Inc. and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in U.S. dollars millions)

Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin excluding Special items

3Q23

2Q24

3Q24

Sales

$

1,658

$

1,880

$

1,835

Operating income

$

307

$

398

$

421

Operating income margin

18.5

%

21.2

%

22.9

%

Net income

$

188

$

266

$

332

Add:

Provision for income taxes

$

54

$

68

$

22

Other expense, net

11

15

17

Loss on debt redemption

-

-

6

Interest expense, net

54

49

44

Restructuring and other charges (credits)

4

22

(1

)

Provision for depreciation and amortization

68

69

68

Adjusted EBITDA

$

379

$

489

$

488

Add:

Plant fire costs (reimbursements), net

$

1

$

(6

)

$

-

Collective bargaining agreement negotiations

1

-

-

Costs (benefits) associated with closures, supply chain

disruptions, and other items

1

-

(1

)

Adjusted EBITDA excluding Special items

$

382

$

483

$

487

Adjusted EBITDA margin excluding Special items

23.0

%

25.7

%

26.5

%

Incremental margin

Quarter ended

September 30, 2023

September 30, 2024

Q3 2024 YoY

Third-party sales (b)

$1,658

$1,835

$177

Adjusted EBITDA excluding Special items (a)

$382

$487

$105

Incremental margin (a)/(b)

59%

Adjusted EBITDA, Adjusted EBITDA excluding Special items, Adjusted EBITDA margin excluding Special items, Third-party sales, and Incremental margin are non-GAAP financial measures. Management believes that these measures are meaningful to investors because they provide additional information with respect to the Company's operating performance and the Company's ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies. The Company's definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold, Selling, general administrative, and other expenses, Research and development expenses, and Provision for depreciation and amortization. Special items, including Restructuring and other are charges (credits), are excluded from Adjusted EBITDA.

Howmet Aerospace Inc. and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in U.S. dollar millions)

Reconciliation of Adjusted Operating Income Excluding Special Items and Adjusted Operating Income Margin Excluding Special Items

Quarter ended

3Q23

2Q24

3Q24

Sales

$

1,658

$

1,880

$

1,835

Operating income

$

307

$

398

$

421

Operating income margin

18.5

%

21.2

%

22.9

%

Add:

Restructuring and other charges (credits)

$

4

$

22

$

(1

)

Plant fire costs (reimbursements), net

1

(6

)

-

Collective bargaining agreement negotiations

1

-

-

Costs (benefits) associated with closures, supply chain disruptions, and other items

1

-

(1

)

Adjusted operating income excluding Special items

$

314

$

414

$

419

Adjusted operating income margin excluding Special items

18.9

%

22.0

%

22.8

%

Adjusted operating income excluding Special items and Adjusted operating income margin excluding Special items are non-GAAP financial measures. Management believes that these measures are meaningful to investors because management reviews the operating results of the Company excluding the impacts of Special items. There can be no assurances that additional Special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both Operating income determined under GAAP as well as Operating income excluding Special items.